Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales and Use Tax Annotations
(a) IN GENERAL—DEFINITION
495.0288 Funding of Purchase—Additional Fees. A firm submits a bid to fund the purchase of equipment by a local government unit. It is the successful bidder and it purchases the equipment tax-paid and sells it to the local government under a contract calling for 60 monthly payments. The agreement provides that title will remain with the firm until the final payment has been made. This provision plus the last sentence of section 6006.3 requires that the transaction be treated as a sale at its inception.
The firm, in turn, issues certificates of participation for sale to investors. The local government unit's payment schedule results in a total that is greater than the price of the equipment, with the difference representing certain expenses related to the financial arrangements, e.g., bond fees, printing costs, etc.
The additional costs added to the agreed purchase price were incurred after the retail sale of the equipment, and are related to the sale of the participation certificates, which are intangible representations of value in the nature of stocks, bonds, etc.
The firm owes sales tax on the retail sales price of the equipment, but is entitled to a tax-paid purchase resold credit; no further tax is due on the financing costs. 8/22/94.